UPDATE: Capitec: We have no knowledge of SARB fee probe

UPDATE: Capitec has said it has no knowledge of such an investigation, adding it is in regular contact with the Reserve Bank and the NCR.

The SA Reserve Bank has written to the National Credit Regulator requesting a probe into loan-origination fees charged by Capitec Bank, according to a person familiar with the matter.

The referral came after the issue was raised in a report by short-seller Viceroy Research in January, said the person, asking not to be identified because the matter is private. The investigation is ongoing, the person said. Capitec Chief Financial Officer Andre du Plessis said he was unaware of the Reserve Bank’s referral, or of an investigation by the Johannesburg-based NCR.

In the report, Viceroy said Capitec’s income was boosted by excessive fees on its multi-loan product, which carried a monthly charge for allowing a previously vetted customer to extend their facility by answering some questions. While Capitec said it terminated the product in 2016, after rules introduced by the NCR meant it was no longer viable, Viceroy said the lender rebranded it and that Capitec’s methods risk over-indebting consumers.

Capitec denied this, saying Viceroy did not understand how the product or its processes work. The NCR had previously probed the multi-loan facility and were satisfied with the fees and interest charged, Capitec said on February 8.

Very active

Both the Johannesburg-based NCR and the Reserve Bank declined to comment.

The Reserve Bank monitors lenders for their compliance with rules ranging from their operations and capital levels to staffing and money laundering, with the ability to fine companies or revoke their licences. The NCR can also administer financial penalties on lenders which violate the National Credit Act, legislation aimed at protecting consumers from becoming over-indebted.

Officials from the Reserve Bank and the NCR told MP's in March that many of the allegations made by Viceroy were not new and that not all of them were accurate.

“The Reserve Bank is very active in doing ongoing reviews at all the banks,” said Du Plessis, speaking more broadly on the regulator’s oversight. “If anything bothers them, they actually contact us or ask that we report on something. That happens on an ongoing basis.”

On Friday, Capitec announced it had reached an agreement with Summit Financial Partners, which was challenging the lender in court and before the NCR on behalf of six complainants. The cases, which mostly centred on Capitec’s now defunct multi-loan facility, were withdrawn.

Capitec’s stock has declined 19% this year, more than any of the other lenders on the six-member FTSE/JSE Africa Banks Index, which is down 5.6%.

On Tuesday morning Capitec responded by saying it had no knowledge of such an investigation in a statement sent to Fin24.

"Capitec Bank has taken note of the blatant, misleading and untruthful media commentary by Bloomberg News service. This storyline has now also been repeated by other news organisations that feed from Bloomberg’s distribution.

"We have no knowledge of the investigation Bloomberg refers to and are in close and regular contact with SARB and the NCR. Questions regarding why Bloomberg would want to mislead viewers and readers through fake news must be directed to them."

Update: This article was updated by Fin24 at 11:40 to include Capitec's response.